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Geopolitical instability and regulatory uncertainty surrounding the EU omnibus have led several companies to rethink their sustainability work. But there are many reasons to work with ESG, and they're not just about compliance.
As a Commercial Lead, I have daily contact with ESG managers and managers from various companies. I often find that there is no consensus on motivation and ambition within companies.
This article sheds light on that issue and presents three primary motivational factors that drive ESG work. Roughly speaking, they can be divided into three broad themes: regulatory compliance, stakeholder requirements and strategic value creation.
1. Regulatory compliance
The highly topical omnibus from the EU Commission to simplify sustainability requirements for due diligence and reporting has put many companies on pause. Uncertainty from Brussels has meant some are pausing and awaiting final demands.
For companies with a focus on compliance, the driving force is above all to comply with the law. Regulatory compliance fills the agenda and budgets are managed with a hard hand.
2. Stakeholder requirements
Another powerful factor comes from stakeholders. EU legislation creates a “trickle down effect” in which subcontractors also notice increased demands from customers and partners.
For example, many suppliers feel that they need to be able to provide better ESG data to larger companies with which they do business. It can also be media publicity or pressure from interest organizations that forces companies to budge.
3. Strategic Value Creation
Finally, we see the strategic motivation. Several CEOs are already working from a clear ambition to reap competitive advantages through ESG. They see the potential of using CSRD's dual materiality assessment as a strategic tool because it provides a better overview and stronger basis for decision making.
Ambitious ESG work can also strengthen risk management, as many business risks are closely linked to social and environmental conditions. Added to this is the brand value, where a green leadership position can be decisive in the battle for both customers and talent.
To ensure momentum on your green ambitions, it is important that everyone has a clear understanding of where the ambitions come from - from senior management to all employees involved in day-to-day operations. In conclusion, here are three reflection questions that are good for aligning ambitions and creating a common understanding between management, ESG managers and external specialists.
- Where does our motivation come from? Is it about compliance, stakeholder requirements or strategic value?
- What internal resources do we have and do they match our level of ambition? Do we need external sparring?
- What financial means do we have available to advance our goals and ambitions?
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